But the ``big three'' banks questioned the feasibility and effectiveness of the proposal. ``We need to carefully examine whether a merger of the three commercial banks will benefit shareholders and the country,'' First Commercial Bank chairman Huang Tien-lin told local newspapers.

``The three banks' operations are too identical. The merger is not necessarily beneficial,'' Huang said. All three banks said they had never considered merging. Hua Nan Commercial Bank's spokesman Chen Yu-chi said he could envisage strong resistance from employees.

``The merger will inevitably affect employees' working rights. It will cause socialproblems," Chen told the Commercial Times newspaper. Opposition lawmaker Lin Wen-lang, who said he would recommend the banks' merger during Wednesday's finance sub-committee session, said the move would strengthen the banks' competitiveness.

If the three banks merge, their combined capital would total more than T$3 trillion (US$87 billion), making it Taiwan's largest financial institution and one of the world's top 100 banks, local media said. Although the ``big three'' were privatised in early 1998, the Taiwan provincial government remains the largest shareholder in the banks, giving it some clout in their management.

Lin said it was a good timing for the parliament to push for the merger as the provincial government would be scaled down in December and its stake in the banks would be transferred to the finance ministry.

The finance ministry said it was in no position to comment. ``If the three commercial banks would like to conduct a merger, they should provide a detailed plan and seek approval fromthe finance ministry,'' it said in a statement issued on Saturday.

``Basically, there is no law prohibiting merger requests,'' it added. Analysts were cautious. ``The (stock) market has definitely over-reacted,'' said trading manager Tsao Chung-ping of Ting Kong Securities.

``The merger of `big three' banks is a highly controversial issue and whether it is feasible is still too early to say. I think some speculators just used it to boost share prices,'' Tsao said.

On Saturday, all three banks surged by their daily seven per cent limit, with Chang Hwa up T$3.5 to T$57.5, First Bank up T$3.5 to T$55 and Hua Nan up T$3.5 to T$57.